7 Tips to Teach Kids About Savings and Debt

This post is series in a partnership with Florida Prepaid College Plans

My kids are both getting older and it’s never too early to teach them how to be responsible with money. I can say that my parents did their best, but they struggled a LOT with money when I was a kid. They never really let us know just how much they struggled (no parent wants their kids to worry) but looking back I know just how hard it was for them. If there’s one thing my parents did teach me it was that when you work hard you will be rewarded. They encouraged us to save and stay out of debt but that didn’t prevent me from digging myself into debt during college to achieve my own goals.

I worked most of my college years full-time and took a little longer to get through college. I racked up some pretty hefty debt along the way to pay for college, books, and all those “essentials” you need living on your own. I paid the minimums on my credit cards just to avoid the late fees and was maxed out on most of them. It wasn’t until I met my husband that I truly learned how to use credit cards responsibly. Without his help I’d probably still be digging myself out of debt and playing the credit card games. I think some of this is just part of growing up and learning how to “adult,” but there are some valuable lessons I really want my kids to learn at a young age. I don’t want them to have the same learning experiences that I did about debt.

Here are 7 tips to teach kids about savings and debt:

1. Save a little, spend a little. When they have cash they almost immediately want to spend it! My littlest still has visits from the tooth fairy and she can’t wait to go to the dollar store and see what she can find! We always encourage her to save part of the money and spend part of the money. They both have coin banks in their room and get to manage that money on their own. We don’t really police how or when they spend it. Neither one of my kiddos have mastered the “save a little” part, but we’ll keep working on it. I know most “experts” recommend saving 10% (or more) of what you earn.
2. Chores and Allowances. I was raised on earning allowances for chores. We loosely do this with our kids, but I never have cash! We let them know that the money we put in their savings account is partly earned from them helping with the chores around the house. Everyone is required to help around the house with dishes, trash, picking up toys, laundry, etc. On occasion if they do something extra helpful we’ll give them cash to manage themselves.
3. Rewards for Good Grades (or Good Work Habits). This is one that we don’t use often, but the money reward might finally be “the” one way my teenager understands that when he works hard, he is rewarded. We’ve struggled in middle school with completing and turning in assignments. He’s always managed to end the grading period with above average grades; even with a million missing assignments. I’m trying my hardest to encourage him to work hard the ENTIRE grading period and not just at the end. This grading period we created a new financial incentive that will reward him for staying on top of his assignments AND for the final grades. He is an A-B student naturally so that is what we based our expectations on (be sure to use a system that meets your expectations for your child, a final grade may not always equal how hard they worked) and set a end of term reward. For each missing assignment throughout the grading period he will owe us $5. At the end of the grading period if he earns all A-Bs he earns his reward minus the $5 for any missing assignments. He could end up owing us money if he doesn’t change his work habits. This system seems to be working (for now), we’re 1 month into the grading period and he hasn’t had a single missing assignment. Remember, it’s not always about the actual grade they earn, but their work habits and how hard they work to achieve their goals.
4. Money management via apps. My teenager has a pre-paid phone now. We finally got him phone service last year because he’s starting to venture out of the house without us and it’s nice to have a way for him to contact us without having to ask an adult to call us. Over the last few months he’s been attending a small youth group meeting each week with some friends from a local church and school. They meet at Starbucks for 2 hours each week without parents and he LOVES some of the fun drinks they have at Starbucks. In the past I’ve been giving him cash each week but I don’t always have cash to give him so we just loaded MY Starbucks account and app on HIS phone. This could fail epically…..but I trust him!  I’m the only one who can load money to the card but he gets to use it at his own discretion each week for a drink at small group. We’ll see how well he manages the money that I’ve loaded and see how long he can make it last. We talked about how much he’s allowed to spend each week; regardless of what the available balance is. Another way to teach kids to manage money via apps is with iTunes and Amazon credits. My daughter has an iPhone (no service) and they both have Kindles. We will randomly add money to each of their accounts so they can buy apps, coins, songs, etc. My daughter is only 8 so her privileges also come with having an adult log in to approve any purchases before they are made. It creates a good opportunity for us to talk about the purchases before they are made. I’m hoping that this will help teach them how to responsibly use a credit card or debit card later in life, since no one (including myself) ever seems to carry cash anymore.
5. Wants VS Needs. This is probably the earliest lesson that most kids get, isn’t it? I know my kids get almost everything that they need and a LOT of what they want. It’s hard for us to say “No” when we don’t say “No” to ourselves. Trips to Target, WalMart, and even the grocery store are good places to teach (and show that we understand ourselves) the difference between wants and needs. If I’ve made a “want” purchase for myself, I try to give my kids the opportunity to pick out a small “want” for themselves as well. If we can’t afford both “wants” then maybe we don’t REALLY “need” them. Always make sure your “needs” are met first before you start picking out the “wants.” My kids aren’t always happy when I tell them “No,” and that’s ok. They need to learn that we don’t always get everything that we want.
6. TALK, TALK, TALK and TALK SOME MORE! Don’t be afraid to talk about money around and with your kids. They are part of your family and can help make decisions on how the family spends it’s (extra) money. Talk about projects around the home that they (or you) want to work on. Talk about the next family vacation. Talk about paying bills each month. Things are different than they were when I was little. Everything is electronic and on cards. I (almost) never pay with cash, but I want my kids to know that everytime I use my card it’s because I have the cash available inside that little card to pay for it. Currently we’ve talked with our kids about cable TV and how much it costs us each month. While we can “afford” what we’re spending it was fun to talk to them about alternatives (Netflix, Hulu, Amazon etc) and they actually got excited about the possibility of getting rid of cable and saving some money. We feel it’s important to talk with them so that they have a good understanding of where our money goes each month.
7. Save for the big stuff! Whenever we make big purchases (like a bathroom renovation, or new furniture, or a vacation, or a new roof) we have always had money in savings to pay for them without putting them on a credit card. The only big purchases that actually get financed (in our home) are the cars and the home. Everything else is paid for by the end of the month; even if we charge them! We let our kids know that we have a savings account of our own that we add money to each pay period to save for bigger things in our lives. We also let the kids know that we have college savings plans for them. It was fun seeing their end-of-year statements arrive this past week from Florida Prepaid so they could catch a little glimpse of their future at work. Our oldest will be starting high school in the Fall (…..breathe….when did this happen….when did he grow up on my….make time slow down….breathe…..) which means that his college decisions are coming up very quickly.

It’s never too late (or early) to teach any of these lessons to your own kids. My daughter’s class is currently learning how to count money so this past week we had our hands in the piggy bank a LOT! There was a lot of talk about how we spend our money and why we don’t always get what we want. It’s also never too late to start saving for College! Florida Prepaid open enrollment is going on through the end of February. It doesn’t take much to open an account and you can start saving for your child’s future today!

Sign up today and use Promo Code: BLOG1617 to save 50% off the application fee! This promo code will save you $25 just for opening a Florida Prepaid account for your child! #StartingIsBelieving

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